F&C Childrens Investment Plans - New Charges

malfesto

[FONT=&quot]Update on the ongoing saga with F&C. They have rejected my complaint regarding exit charges (of £12+VAT per stock) for transferring out of the Children Investment Plan/Private Investor Plan labelling it as "standard administrative cost" and not an exit charge or penalty.

F&C misinterpretation of the Unfair Terms in Consumer Contracts Regulations in the face of guidance from the FSA, OFT and undertakings by other financial firms (namely Intelligent Finance & Jarvis Investment Management) who committed similar breaches of the law is befuddling.

I have replied pointing out that the detailed guidance by the OFT on the law (OFT311 document) clearly shows that their actions have caused a significant imbalance to the detriment of customers.

I will be taking this up with the Ombudsman. Have also made a referral with the FSA Unfair Contract Terms team about breaches in the law and have been assigned a Conduct Specialist.

Would reiterate that those who want to leave, make a direct complaint to F&C (investorrelations @ fandc . com) regarding breaches in the Regulations as well as making a referral to the FSA. The more people complain to the FSA, the more likely it will intervene with F&C.

Included an example below to be used at ( www . fsa. gov . uk / doing / regulated / uct / faqs / form )

What is the name of the firm?

F&C Management Ltd

Please give the title of the contract

Terms and conditions for the F&C Investment Trust Savings Plans
(www . fandc . com / documents / cip-key-features /)

Please give details of the exact term(s) in the contract you believe to be unfair.

F&C Management Ltd has unilaterally changed the charging structure specifically the introduction of annual management charge for customers in its Children Investment Plan (www . fctr . co . uk / changes / changescip / index.html ). At the same time, F&C has insisted on the imposition of transfer out charges for customers who do not accept the changes in Terms & Conditions.

Please explain why you believe the term(s) to be unfair.

Customers’ inability to freely dissolve the contract in response to changes in Terms & Conditions. F&C has made it clear that exit charges will be imposed on customers who want to transfer out existing share holdings. Its online FAQ section (www. fctr. co. uk / changes / changescip / faq . html ) states that existing holdings will be sold to pay exit charges if payment via cheque is not included. Fair treatment of customers would require exit charges to be waived and a reasonable amount of time to be allowed to make the necessary arrangements to transfer holdings to new provider.

How have you or the person you represent been affected by the term(s)? Please give details.
(If the contract has not yet been entered into, please explain how you believe the term would affect consumers in general)

Changes in Terms & Conditions for F&C Private Investor Plan will take effect unilaterally on 6 April 2013. Given that exit charges are imposed on customers who decline changes in Terms & Conditions, significant imbalance occurs to the detriment of customers in breach of the Unfair Terms in Consumer Contracts Regulations 1999.[/FONT]

nickpowell77

All - I only have £3-400 in the fund and £25 a year cost is steep as I don't plan to pay anything else into this. I don't like the idea of full access at the age of 18.

I don't mind a £12 + VAT transfer fee. Could somebody recommend an alternative to transfer to?

Thanks, Nick

atush

All other CTFs will revert to the child at 18, so that wont help you much.

you could ask to be transferred to their stakeholder plan, or to another CTF you find via the Best CTF thread?

wazza24

nickpowell, what funds are you in, global smaller companies has made great gains this last year. i dont think my boys CTF would have made better gains anywhere else anyway. will give it a go for a year and see what happens.

neet

I have made a complaint and got a letter back from F&C basically saying we are right and so if you want to do anything move.

I have posted a long letter to the FOS to raise a complaint but would be very keen to know what others are doing. I am happy to share the letter if others are interested in complaining too. It may be a further complaint to OFT MMC and FSA raising the principles would be better?

neet

I have rather missed this forum due to the issue being so spread around but keen to join you. How are you getting on with the complaint. I have a separate one to FOS but i think they are rather an arbitrator not a real principled analyser of terms. My goal would be to get them to climb down on all the fee increases. My key areguments to the FOS are


Dear Sir



Complaint againstF&C Investment management concerning new Child Trust Fund charges

This is a Formal complaint against F&C for imposing a onesided variation to a standard contract concerning fees, specifically thelevying of a £25 +VAT charge. I contend this increase is contrary to the unfaircontracts act, in breach of the implied warranties entered into by F&C as apart of the agreement with HM Government and exploitative of an oligopolisticposition in the market which makes the proposed variation in the terms contraryto public interest.

An initial brief letter of complaint is attached. The basisfor determining what is reasonable, which I contend this charge is not, is amatter of context. The key context here is:

a) the unfair contracts act is designed to prevent anybusiness from creating terms, hidden in the fine print, or arbitrarily imposedthrough variation, which are manifestly unfair. It seems extraordinary that thefinancial services industry gets away with this so often that it is now justregarded as standard practice. This increase is self evidently unfair becauseit essentially says to a significant proportion of the savers originallyoffered the product, that whereas once you could save money with us to produce anadequate risk adjusted return now we are imposing a fee which means you can’t. Justby way of reminder the act, an imposition by the Crown in parliament upon theright of individuals to make any arrangement they wish, is a recognition of aninequality of knowledge and power in some situations. You might have thoughtthe word CHILDREN’S in the trust fund would have alerted the corporate raidersnow running F&C that this would be a situation where the act applies. I canaccept why F&C are disappointed that the CTF has ended, after all whichbusiness would not relish a product line which stretched into perpetuity, butthis does not justify the introduction of unfair terms when parliament ends theprovision of a particular savings scheme.

b) this is a sponsored government arrangement in which aterm of reasonableness is implied in the context of the ‘grant of the right tomarket their funds under the CTF’ umbrella. This does not allow a cherrypicking post event of the large profitable clients and a driving away of theothers who have simply left the original taxpayer gift of money with them tomanage (by levying a fee which is so confiscatory of the return premium on themoney that it leaves no point in the money remaining). One test of whetherthere was an implied warranty on the reasonableness defined by context is asfollows: - had F&C disclosed this intention would they have been allowed tooperate as a provider?

c) financial services is inevitably highly regulated. Thiscreates a walled garden where competition cannot easily spring up andconsequently oligopolistic practices arise. It seems extraordinary, given thewide spread acceptance of this fact that their letter responding should be referencingmarket pricing – when in an oligopoly the reality is that there should be apresumption against the market price, not in its favour. There is a still morepernicious activity displayed in their current behaviour which should deeplyconcern you, namely the use of a regulatory change as an excuse for launching aprice gouging spree. The implied trigger seems to be the RER, making thebearing of costs by the trust less justifiable. F&C, the party I and thegovernment contracted with are seeking to avoid this by claiming it was alwaysa matter in large part for the trusts. It was fortuitous for F&C that for aperiod they have been able to offload some of their costs, allowing them tokeep more of the trust fee income. That this has ended is a disappointment forthe shareholders of F&C, but this does not allow the imposition of unfaircharges.

A lengthy letter of response from F&C, whilst showing admirable“understanding” for the “disappointment” I might feel that they had levied acharge effectively destroying all future returns on the money (and for many othersavers probably the whole of the capital too) does little more than to contend that each ofmy points is wrong. Their motivation isnot apparently profit improvement – and in a world where transaction and computingcosts are falling they apparently are suffering rises. They also seek toconfuse the context of the complaint by suggesting that they could not haveknown precisely the number and further investment intentions of the originalsavers. This is utterly disingenuous – they did not need to know precisely, nordid I contend they did. The reality is many thousands save with them as theyhad hoped and that some do so in scale profitable to them, with the regularsavings also providing much needed demand tension to close the Trust’s discountand hence protect F&Cs fund income from the predations of arbitrageurs. Theuncertainty of just how many and at what scale investors save is precisely therisk they embraced at the outset in the hope of making money. That there isrisk in any business comes as a surprise to only a few, fortunate enough tooperate in an oligopolistic market. They now wish to winnow the chaff but thisis not an option the government would ever have countenanced at the outset. Aninteresting further line they introduce is to suggest the fact that it is anactively managed fund apparently adds to the cost of sending me a piece ofpaper every year (although the costs of the “active” management of the equitiesare actually are borne by the trust). In short F&C gave full considerationto all my points and without any clarification of the economics – transparency isnever a strong point of this industry - rejected them all, leaving me no option but toelevate the complaint to you.

ACTION

I would ask that you request the fees be suspended and thatFSA look at the complaint in detail, including asking F&C for a totalbreakdown of the fees attracted by the CTF together with the associated coststo determine if the fee is reasonable. If you find questionable arithmetic Iwould further ask that you refer the provider the MMC to see whether anindustry wide investigation of the practice of arbitrary contract variationneeds to be undertaken. I would also ask if you could explicitly allow emailbased reporting to be undertaken by the provider to reduce the costs ofadministration, which I estimate are around £5 per account p.a.